Kenya’s debt payments surpass the government’s current expenditure
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Debt payments surpass the government's current expenditure further highlighting the financial crisis in the country
Debt payments surpass the government’s current expenditure further highlighting the financial crisis in the country.
For the first time in the first nine months of the current fiscal year, debt repayments exceeded the national government’s recurrent expenditures on things like civil servant salaries, highlighting the weight of growing State borrowing.
Kenya increased its debt repayment expenditures between July 2022 and March from Sh740.69 billion to Sh815.35 billion.
According to Treasury figures, this is the first time in Kenyan history that debt payments have exceeded recurrent expenses, which totaled Sh814.7 throughout the period.
The Treasury data shows debt repayments have nearly tripled in six years, having surged from Sh273.64 billion in the nine months that ended March 2016.
The debt servicing costs have been climbing in recent years after the grace period extended by rich countries, particularly China, expired, with repayments for domestic debt fast falling due.
At Sh815.35 billion, debt repayments have gobbled an equivalent of 58.52 percent of Sh1.39 trillion taxes collected in the nine months to March 2023, leaving little cash for building roads, affordable housing, and revamping of the ailing health sector—which are key for job creation and improved living standards.
Kenya’s debt increased more than four-fold to Sh8.66 trillion under Dr. Ruto’s predecessor, who invested heavily in new rail links and other infrastructure.
The surge in liabilities left the country at high risk of debt distress, according to the International Monetary Fund.
Kenya has insisted it cannot default on its debt repayment obligations.
Recurrent spending dropped by Sh4 billion to Sh542.6 billion when the Ruto and Kenyatta presidencies are compared while development expenditure fell by Sh32.7 billion to Sh106.7 billion.
Recurrent expenditure normally includes civil servant salaries, domestic and foreign travel costs, and fuel costs for the government’s fleet of vehicles.
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Analysts at Parliamentary Budget Office (PBO) – a unit that advises lawmakers on financial and budgetary matters – say public borrowing in the coming years will be driven more by the need to repay maturing debts than fund infrastructure development.
The growing debt burden reflects fast-maturing commercial and semi-concessional loans which the Jubilee administration contracted in its early years in office to build a modern railway, new road highways, bridges, and electricity plants.
“Whilst initially the fiscal deficit was prompted by large infrastructure-related expenditures, the increase in debt servicing expenditures alongside critical expenditures (such as the implementation of the economic recovery strategy, national election-related expenditures) is expected to play a greater role in the stickiness of the fiscal deficit over the medium term, and determine the pace of debt stock growth,” PBO wrote in an analysis on debt management strategy.
Large external repayments which had been budgeted at the beginning of the financial year included Sh103.75 billion to China’s Exim Bank which funded the standard gauge railway, among other projects, and Sh61.88 billion to a syndicated loan arranged by Comesa-owned Trade and Development Bank.
Others are interest payouts for the Eurobonds (Sh53.57 billion), World Bank Group’s International Development Association (Sh49.19 billion), Italy (Sh19.73 billion), France (Sh17.98 billion), and Japan (Sh12.42 billion).
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